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Airbnb: A good idea but approach with caution

You are a tenant or a landlord and you come across Airbnb. What a great idea, you think. You can make more money out of subletting or renting out your property on this website than you are paying in rent or (respectively) receiving from longer term tenancies of 6 or 12 months. As our friends across the pond might say, it’s a no brainer…

Well think again. All is not as simple as that and by using Airbnb you could be jeopardising your legal interest in the property. Obviously not something you intended to do!

I am not saying using Airbnb is not a good idea, but like any new idea, it must be approached with caution and with full information. So what do I mean?

The Risks

As an owner:

Greater London Properties – Until recently, you had to have planning permission in London if you wanted to rent out your London property for less than 90 consecutive nights. The Deregulation Act 2015 changed that and short-term lettings for a maximum period of 90 days are now generally permitted. However local authorities can dis-apply these regulations for particular areas, or even particular properties.

Mortgaged Property – Most mortgages include a clause preventing any letting without prior consent and lenders would either say no or may consider granting consent subject to the payment of a fee. So should you proceed anyway? It is understandably appealing to either not approach your lender for consent or to go ahead anyway, even if they refuse. After all, how can they find out? They can and do. Lenders monitor such websites and can carry out checks to see if properties are advertised on Airbnb and other sites. If you apply for a re-mortgage these checks are much more likely to be carried out. Lenders may also be able to identify Airbnb income from bank statements. In the event that you don’t request consent and they do find out they could demand a substantial one off fee or increase your mortgage rate. They could even call in your loan, seeking immediate repayment of your mortgage. The fact is letting your property without your lenders consent is a significant risk which may not be worth taking on a cost benefit analysis.

Insurance – you could invalidate your insurance policy if you let you property using Airbnb and don’t inform your insurer. Using Airbnb changes your policy risk profile and the insurer could use it as a reason to reject any claim.

Health and Safety – If you let the property as a landlord, you would be obliged to comply with health and safety laws, just as you would if you were letting it on a regular 6 / 12 month tenancy.

Damage to the Property – this is a very real risk and one that can cause you a headache, especially if the damage isn’t covered by the limited Airbnb host guarantee or you have not told your insurer about your use of Airbnb.

Your Airbnb Guest refuses to leave – You can change the locks at the end of the term without a court order, as it is a holiday let. However it is a criminal offence to use or threaten to use force to evict the guests and therefore you should think carefully before doing so. The prudent method is to issue a claim for possession and get a possession order, although this will be at a cost and will delay your re-letting of the property for at least 3 months.

As a Tenant:

Lease Terms – aside from it being dishonest to do so, your lease will probably include terms that prohibit you subletting your rented property or only permitting you to doing so with your landlord’s written consent. It might also prevent you using the property for the purpose of a holiday letting. If so any breach may lead to forfeiture action being taken by your landlord which ultimately could lead to you losing your property and having to pay a hefty costs bill or face your credit rating being irreparably damaged by having a judgment registered against your name.

Insurance – you must make sure that your insurance is not invalidated by subletting your property on Airbnb.

Damage to the Property – you will be liable to your landlord for any damage caused to the property by your Airbnb guests and this could mean to you losing some or all of your deposit;

Health and Safety – If you are a leaseholder with a long lease, and decide to let the property as holiday accommodation, the health and safety laws would apply to you as you would be considered to be a landlord under the law. For instance you would have to comply with the relevant fire regulations and in due course have installed smoke alarms and (where necessary) carbon monoxide alarms.

Change of Use – recent case law means that even if your lease does allow you to sub-let your property the use of Airbnb may be deemed a breach of any clause in your lease which restricts the use of the property as a private residence only or prohibits carrying out any business in the premises.

Nuisance – As a leaseholder you could be in breach of your lease if your guests are causing noise in the property, and the freeholder, or any of the other leaseholders can bring a claim against you. It has been held that by permitting Airbnb guests to use the property, and those guests, either having parties or the leaseholder permitting them to do so, the leaseholder would be responsible, as if he were hosting those parties himself

With thanks to Daniel Stern of Slater Heelis for this article. Daniel joined law firm Slater Heelis in 2016 as a commercial and residential property litigator in the Dispute Resolution team and is based at the Manchester office. He trained in London and has expertise in commercial, banking and real estate litigation, advising both national UK and overseas clients on a wide range of issues. His previous clients range from one of the largest pizza takeaway chains and FTSE companies to SMEs, landlords and high-net worth individuals.